Investors who bought shares from selected firms at the start of year and decided to hold them throughout have reasons to smile as shareholders rake in 100 percent returns despite the bumpy rides in 2021, analysis by BusinessDay has shown.
Stocks of some firms listed on Nigerian Exchange Group (NGX) such as Guinness Nigeria, Honeywell Flour Mills, LASACO Assurance, Vitafoam and six others showed they are immune to the reality of the Nigerian economy as they recorded impressive 100 percent returns in eleven months to December 16.
The local bourse ended the year 2020 as the world’s best performing stock with a record 50 percent gain as many investors piled into the market on the back of lower interest rate in the fixed income space.
However, in the first half of 2021, the appetite for stocks waned when yields began rising and investors moved out, seeking investments that can give better returns. The benchmark index plunged 5.86 percent as a result.
However, a rebound was observed in the stock market in the third quarter as investors took position ahead of Q3 earnings releases. All Share Index is up 5.09 percent year till date
“The rebound in the local bourse kicked off in the third quarter as the release of impressive corporate earnings drove buying interest. In addition, positioning for 2021 full year dividends to be declared in H1’22 was sustained the positive sentiment in the local bourse,” Gbolahan Ologunro, an economist at Lagos-based Cordros said.
However, foreign portfolio investors have continued to stay on the sidelines.
“Investor participation in the equity market has been largely driven by local investors, with the NGX placing average local participation at 78.6 percent and foreign investor participation at 21.4 percent for the year. Given the inflationary trend so far, we believe that foreign investor participation slowed given significant negative real return in the space,” analysts at Vetiva Capital said.
Foreign investors have remained on the side-lines of the Nigerian stock market since 2020 as a result of currency uncertainties.
Some firms have benefitted from this with their shares rising significantly this year. These companies are;
Morison Industries
Morison’s share price is the best performer on the NGX as it stormed 285.7 percent higher so far this year.
The manufacturing and pharmaceutical company began the year with a share price of N0.49 and closed at N0.86 per share on December 16th 2021.
LASACO Assurance
LASACO’s share price was also on fire this year with 162 percent gain. The insurance and financial service company opened the year with a share price of N0.38 and rose to N1.1 per share as at December 16th 2021.
Honeywell Flour Mills
Honeywell flour mills share price have returned about 212 percent gains for investors who bought them at a low trading price of N1.28 per share at the beginning of the year.
The miller’s shares have risen significantly since it was acquired by Flour Mills of Nigeria as investors have reacted positively to the development.
Flour Mills of Nigeria reached an agreement with Honeywell Group to acquire its 71.69 percent majority shareholding interest in Honeywell Flour Mills Plc. (HFMP) at N80 billion last month.
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Champion breweries
Champion breweries share price surged 202 percent to N2.6 per share from N0.86 per share at the beginning of the year.
The surge came on the back of Heineken’s indirect acquisition of additional shares in Champion Breweries through Raysun Nigeria Limited on the 8th of January 2021. Heineken purchased about 1.9 billion shares at a price of N2.6 per share, raising the ownership of Raysun to 84.7 percent. Since then, buying interests by investors continue to prop the shares of the company.
Vitafoam
Vitafoam’s share price recorded a 176 percent gain this year. The manufacturer of foam products saw its share price rise to N21.5 per share compared to N8.75 per share at the beginning of the year.
Royal Exchange
The share price of Royal Exchange, one of Nigeria’s foremost financial services groups offering general and health insurance, also gained 130.7 percent in 2021. The insurer’s share price began the year at N0.26 and has surged to N0.63 in the review period.
University Press PLC (UPPLC)
UnConsolidated hallmark insurance’s share price also gained 129.6 percent. The book publisher’s share price opened the year at N1.28 per share, surging to N2.94 as at 16th December 2021.
AXA Mansard
AXA Mansard shares have gained 119 percent, ranking it 8th among the top performers in terms of year-to-date performance.
The insurance firm share price opened the year at N1.32 and has risen to N2.3 in the period under review.
United Capital
United Capital, a leading African financial and investment banking Group has seen its share go up by 112 percent to N10 per share as at December 16th 2021 compared to N4.71 per share at the beginning of the year. The company ranks 9th on the NGX in terms of year-to-date performance.
Guinness Nigeria
Guinness Nigeria’s ranked 10th on the NGX with 105 percent gain. The beer maker’s share price opened the year at N19, surging to N39 in the period under review.
Worst performers
While some stocks have returned over 100 percent, some others have not performed as well. Some of these stocks include SCOA Nigeria (-64.5 percent), SUNU Assurance (-55 percent), FTN Cocoa (-37 percent), Japaul Gold (-37.1 percent) and Vanleer (-33.5).
Outlook for 2022
Analysts are not expecting the equities market to stay in the positive territory all through 2022.
“2022 will be a challenging year for the equities market particularly in the second half. The blend of a heated political climate due to pre-election activities and the probable tightening of monetary policy by the CBN will undermine appetite for stocks,” Ologunro said.
Ologunro also explained that foreign portfolio investors are likely to still remain on the sidelines due to capital flight induced by rising global bond yields and the local bourse will struggle to trade in the positive territory throughout the year.
Analysts at Vetiva expect interest rates to increase especially in the advanced economies which would trigger corresponding rate increases in emerging economies. “We see rate hikes across the local fixed income space ensuring strained foreign investor participation in the equity space.”
“Despite this, we see another good year for the oil and gas sector, given our outlook for still strong oil prices. Thus, we expect this to sustain positive sentiment in oil-producing stocks,”
“Furthermore, ongoing CAPEX implementation should keep sentiment in the industrial goods sector stable, while expected rate increases could see banks’ interest income rise. Meanwhile, we expect investors to remain wary of the consumer goods sector, given the direct burden of inflationary pressure on margins, and ultimately profit,” the analysts said.
